Question: Mutual funds minimize risks by diversifying the investments they make

Mutual funds minimize risks by diversifying the investments they make. There are mutual funds that specialize in particular types of investments. For example, the TD Precious Metal Mutual Fund buys shares in gold mining companies. The value of this mutual fund depends on a number of factors related to the companies in which the fund invests as well as on the price of gold. To investigate the relationship between the value of the fund and the price of gold, an MBA student gathered the daily fund price and the daily price of gold for a 28-day period. Can we infer from these data that there is a positive linear relationship between the value of the fund and the price of gold? (The authors are grateful to Jim Wheat for writing this exercise.)


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  • CreatedFebruary 03, 2015
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